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Startups squeeze into electric car market

Electric car startups are still newcomers in the world's largest auto market. The market is now so crowded that competition will get fiercer in the future.

Zeng Hua, who was born in 1982 and works as a senior manager in a Shanghai-based consulting firm, took ownership of a new NIO ES8 electric sport-utility vehicle this month.

The Shanghai-based electric car startup company was ahead of most of rivals when it delivered its first production model to the mass market in June.

“The appearance of the car was very attractive to me,” said Zeng. “This is my second car. The other is a standard internal combustion vehicle, so I thought I would like to try an electric car. So far so good. My new car can accelerate from zero to 100 kilometers an hour in just 4.4 seconds.”

Another added attraction for status seekers is that the NIO ES8 is so unique. In the first week he drove it, Zeng found someone taking pictures of his new car and asking about its specifications and price. The seven-seat model costs him 480,500 yuan (US$70,764).

Unlike traditional car manufacturers such as Mercedes-Benz, BMW and Audi, electric car startups are still newcomers in the world’s largest auto market. Since 2015, China began issuing permits allowing non-traditional automakers to manufacture electric cars. The policy attracted a number of startups.

SHINE

There are 455 registered new-energy vehicle companies and 49 electric car startups in China’s auto market, according to a recent survey by consulting firm J.D. Power. The market is now so crowded that competition will get fiercer in the future, the firm said.

Among some of the most prominent of the electric car startups, NIO, WM Motor Technology Co and Nanjing-based Future Mobility Co have partners or investors from the mainstream auto industry and from Internet-related businesses.

New players

NIO, founded by William Li, focuses on the design and development of high-performance electric cars. Investment in the startup came from several companies, including Internet giant Tencent and Baidu Capital.

NIO has partnered with Anhui Jianghuai Automobile to manufacture the electric cars in Jianghuai’s plant.

Imaginechina

The young generation takes a close look at the new ES8 electric car, presented by Shanghai-based NIO.

Future Mobility Co, co-founded by two former BMW executives, has built its manufacturing facilities in Nanjing, with investment from state-owned automaker FAW Group.

The company aims to provide consumers “intelligent cars” with multiple screens, including a touch screen that replaces the central console panel inside the vehicle.

The company will market the cars under with the brand name Byton. Future Mobility and FAW Group are collaborating in research and development, production and sales of electric cars.

Imaginechina

Future Mobility Co, co-founded by former BMW executives Daniel Kirchert (left) and Carsten Breitfeld, has built electric car manufacturing facilities in Nanjing, with an investment from state-owned automaker FAW Group.

Freeman Shen, who left Chinese automaker Zhejiang Geely Holding Group to establish Shanghai-based startup WM Motor in 2015, set up a factory in Zhejiang Province at the end of 2016. Earlier this year, the company unveiled an electric SUV costing around 200,000 yuan.

Shen brings to WM Motor a background in automotive engineering. Its investors include Baidu.

Zeng was pretty savvy about electric cars and available models before he bought one. However, most consumers are still in a fog when contemplating industry newcomers with unfamiliar brand names. They aren’t sure what to make of the new choices.

Yangtze cluster

Most of the electric car startups are still in the early stages of launching concept cars. Not many of them have actually delivered their vehicles to consumers.

NIO is ahead of the pack in that sense. Byton and Xpeng, among others, will need another year or two to get their cars on the roads.

“More than half of electric car startups have set up headquarters and factories in the Yangtze River Delta, including Shanghai and Jiangsu, Zhejiang and Anhui provinces. It’s an area of demand, where more consumers are willing and have the budget to buy electric vehicles,” explained Xu Jinquan, chief executive officer of consulting firm TimerAuto.

The stretch from development to production involves major factors.

The ability to raise funds and create integrated supply chains will determine which Chinese electric car startups succeed, Xu said. And price negotiations with auto-parts suppliers will be crucial.

Zhang Xiaofeng, an independent market analyst, noted that a small number of electric models have been delivered to date.

That demand is pretty easy to handle, but if large numbers of orders start to flow in, allocation and scheduling of resources will become very important for electric car startups.

“A company needs to maintain consistency of service to its customers,” he said. “When there are few consumers, a carmaker can deliver vehicles pretty quickly.”

When more and more people place orders, it really takes time and effort to maintain the same high-quality service to each buyer.”

Market observers also point out that China’s electric car startups are likely to face competition from the big name in the global industry — Tesla.

That means they need to accelerate their development pace. US-based Tesla has just signed agreements with the Shanghai government to set up a wholly owned electric car factory with an annual capacity of 500,000 vehicles.

“Chinese electric car startups will face certain competition if Tesla chooses to manufacture high-end electric cars like its model X in Shanghai,” said Yin Chengliang, director of the Institute of Automotive Engineering at Jiao Tong University. “It all depends on which model Tesla chooses to produce here.”

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